Greenspan tones down recession warning

Former Federal Reserve Chairman Alan Greenspan told participants at a Tokyo seminar Thursday that he did not think a U.S. economic slowdown was “probable,” toning down his earlier warning about a recession later this year.

“It is possible we can get a U.S. recession toward the end of this year, but I don’t think it’s probable,” Greenspan said at the forum organized by international brokerage CLSA.

On Monday, Greenspan said a recession was possible, though the timing was difficult to predict. The comment was blamed in part for the global stock market decline this week.

A plunge in Chinese share prices Tuesday and weaker-than-expected U.S. durable goods orders for January were also said to be behind the slump.

Speaking via satellite to investors at CLSA’s Japan Forum, Greenspan on Thursday appeared to hedge his bets on his predictions. “Things look reasonably good in the short run for the U.S. and the world,” he said. But “we can’t just assume that this extraordinary period of recovery can extend indefinitely.”

Greenspan also said Thursday that the U.S. had “gone through the major part of adjustment” in housing prices and “the worst is over,” though the housing market was expected to remain weak, according to CLSA.

Greenspan repeated that it was in China’s interest to allow the exchange rate of its currency, the yuan, to be set by the market. That, however, would do little to improve the U.S. trade balance because a decrease in imports from China would probably be replaced by those from other developing nations.